Sunday 23 October 2016

Public procurement and sticking to single market rules

Published 25/10/2015 | 02:30

There is still a distance to travel before Europe has a fully completed single market
There is still a distance to travel before Europe has a fully completed single market

The Continent's common market has been the cornerstone of European integration for the past half century. If it hadn't been created, or if Ireland hadn't become a part of it, there is reason to believe that we would still be the poorest country in western Europe - as we were for most of the period from independence to the 1990s.

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Removing barriers to cross-border economic activity has taken place on the foundation of the 'four freedoms' - the free movement of capital, labour, goods and services. Implementation from Strasbourg and Brussels has happened gradually, and grindingly, over decades.

Even after tariffs and quotas were formally abolished in 1968, plenty of barriers to cross-border trade remained. The costs of operating in different countries stayed high. Each member state had a different set of laws, national standards and regulations. Either by accident or design, governments continued to put in place barriers which impeded trade and, more often than not, tended to favour domestic firms.

The protectionist instincts of politicians and vested interests die hard.

In order to make the transition from a 'customs union' (a kind of glorified free trade area) to a true common/single market, laws that apply to the whole bloc have gradually been introduced, in an attempt to level the playing field by setting minimum EU standards. As it stands, there are now 1,115 directives and 2,900 regulations that Ireland and other member states are obliged to fulfil.

Every year the European Commission releases a Single Market Scorecard*, which analyses how member states are faring with directives. The scorecards give a valuable insight into how countries compare in living up to their commitment to opening and levelling the commercial playing field.

The latest scorecard was published last week. Overall, Ireland does pretty well, registering either better than average or coming in as average. In none of the seven areas is it below average.

The first category concerns the passing of EU laws into domestic law. The 'transposition deficit' measures the gap between the number of single market laws adopted at EU level and those in force in member states. This deficit has fallen steadily across the bloc since the 1990s, with Ireland being among the best performers, at 0.4pc currently. The EU average is 0.7pc.

Typically a directive is drafted by the European Commission. It is then enacted by the Council of Ministers and European Parliament. Member states are given a timetable (sometimes spanning years) to implement EU directives, but they are given plenty of discretion on how they do so.

Sometimes a member state is already in compliance and does not need to do much. At other times it may require amendments to law or policy.

While Ireland performs well by this metric, there is still room for improvement. Quickly adopting directives is not necessarily a good thing if there is insufficient thought given to implementation.

Proposals that a reformed Seanad be in charge of monitoring the many laws that emerge from Brussels each year are eminently sensible.

A measure of how well EU directives are being implemented is the number of infringement proceedings open against member countries. In the event of non-compliance, a member state can be brought to the Court of Justice of the European Union (formerly known, and still often referred to as the ECJ, the European Court of Justice). The judges there can impose fines. Here, Ireland performs less well. Although the number of pending proceedings (21) is not the highest by any means, Ireland is below average both in terms of the length of time infringement proceedings drag on, and in the lag between the time the Court makes its ruling and implementation finally happens.

As with transposition, the infringement rates across the bloc have fallen over the years. That has happened in part thanks to schemes, such as the EU Pilot, that attempt to solve compliance problems without resorting to court.

Readily accessible knowledge is crucial to enabling businesses and people to engage in cross-border activity. The European authorities encourage governments to set up agencies and websites to clearly outline information needed to move or do business in Ireland. SOLVIT aims to help people who moved around Europe and encounter problems that are against EU rules. It attempts to be an informal mechanism to deal with complaints, as an alternative to court cases. Ireland performs well in this regard.

The scorecard also focuses on public procurement - a hugely important area, as governments are by far the single largest purchasers of goods or services in any economy, accounting for around 18pc of GDP across the EU as a whole. The area is, therefore, of significance to a huge number of businesses.

Perhaps for this reason, allowing non-national companies a slice of the public procurement pie has long been a thorny topic. Several countries have resisted and complicated the process.

In this area, Ireland's performance was described as satisfactory in the latest scorecard, with good scores registered in the two categories deemed most important: the number of public contracts which are not put out to tender, and those which are opened to tender but end up having only one bidder.

It points to something being clearly awry if only one firm bids for a large proportion of public procurement, or if the process was not even put out to tender in the first place.

As well as not being transparent, it hinders competition and can mean higher prices. Government and public authorities - and ultimately the taxpayer - stand to lose.

During 2014, only 8pc of tenders in Ireland had a solitary bid, and no procurement contracts were not put out to tender. However, Ireland performs poorly in some other aspects of public procurement, including bulk buying; the speed of decisions; and the quality of information provided by public purchasers. Moreover, half of Irish contract awards contained no information about the value of the contracts awarded.

Ireland has benefited enormously from EU membership and there is scope to benefit more if all member countries adhere to the rules that they themselves have collectively set. Everyone would benefit even more if the single market was widened and deepened. Although not a silver bullet that could solve all of Europe's economic woes, it would enable the region to be more competitive and dynamic.

This is evident in big sectors where much work needs to be done - such as services, capital markets, the digital economy and energy. There is still a distance to travel before Europe has a fully completed single market.


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